In the State of Washington, an Offer Contingent on the Sale of the Buyers Home Selling is often fraught with all kinds of issues from the simple inability to get an offer on your Buyers home to the ramifications of waiving vs. satisfying their contingency. On top of all that, there are a myriad of additional forms and addenda that need to be in place to complete the transaction…I don’t know about your local MLS, but our Contingency Form is as confusing as they come!
Step 1. Getting the Seller on Board.
First thing that has to happen in our Contingency process is the Buyer must list their home within 5 days of making their offer and it has to be listed in the MLS. The next item is dealing with the listing agent on the seller’s house as they are inevitably attached to the outcome of your sale so their input is certainly going to have an impact on whether their seller will take you offer or not. Finally, if your buyer accepts an offer that itself is contingent on the sale of that buyer’s house or if the offer has a closing date of less than 30 days or more than 45 days…Seller must give written consent or your buyer can’t accept such offers. Here’s the kicker, if your buyer does accept such an offer without seller’s written consent, they automatically terminate the agreement and forfeit their earnest money.
Step 2. Waiving vs. Satisfying
There is a DEFINATE difference in the meaning of these two terms and how they affect your buyers earnest money as well as their commitment to purchasing the home…whether they sell their home or not! In the event your buyer has received an acceptable offer, then they can and should SATISFY their contingency and move forward to closing…easy squeezy! However, if the seller receives an offer acceptable to them (and is not contingent on the second buyer selling their home), then the seller will give notice to the buyer they have another offer. Generally no longer than 5 days (commonly referred to as the BUMP PERIOD) from the date the sellers receive their second offer, you buyer has to decide if they want to NOT WAIVE their contingency in which case the deal is terminated by the buyer and their earnest money is refunded back to them. Or, they can elect to WAIVE their contingency (without selling their existing home) and proceed to closing in 30 days. This is always a tremendous risk due in large part because the buyer will likely not qualify for a loan if they don’t sell their home. That said, WAIVING is rarely an option in this market. I will spare all of you the 3 different forms required in the process, the bump notice, the bump reply and the second buyer addendum required by the seller to the second buyer, but suffice it to say, this is an area worthy of its very own blog post!
Step 3. Closing
Well, the stars all aligned and you were able to get an acceptable offer for your buyer’s home and thusly SATISFYING their contingency. Now there is the little matter of coming up with a closing date. Way back when you wrote the offer for your buyer’s, there was the little legal matter of determining a closing date and putting that on the Purchase and Sale agreement…but wait! You didn’t put a closing date on the P&SA because you didn’t have one yet, so now what? Inside the Contingency form is a provision that states that the sale of the property shall be closed 3 days after the closing of the sale of the contingent property.
So there you have it…as the ever exciting world of Real Estate Contingencies & Addenda go…this one is right up there with watching paint dry! Oh wait, I didn’t go into some of the fun stuff that happens in the event your buyers homes sale fails to close after they SATISFIED their contingency or how WAIVING their contingency also constitutes waiver of all other attached contingencies like inspection and financing…maybe I’ll talk about that another time. I’d love to hear from you…let me know what your MLS or State does differently (or more excitingly) with their contingency forms.